But ultimately, it's no secret that renewal premiums are dropping, and they're dropping dramatically. In some cases, they are down over 20 percent, and that's because of a drop in the ratable base as well as standard rate reductions.

For insurers, successfully navigating through this market depends on how well they can balance their underwriting risk with the desire to close a fair deal for all parties. Smart underwriting is the best way for insurers to protect themselves from taking on undue risk and making themselves vulnerable to paying out a costly claim.

It is critical for insurers to maintain underwriting integrity by not just asking for but demanding complete loss history. Five years of currently valued hard-copy loss history is a must, and seven years is preferable for higher hazard states such as Alaska, Arizona, California, Florida, Louisiana, Hawaii, Mississippi, Nevada, New York, Oregon, South Carolina, Texas, Washington and West Virginia.

A seven-year mandate requires extra work, because insurers have to dive further into the severity and frequency of past issues. It also requires due diligence and demands more time. But in the end, it is smart underwriting. A seven-year guideline helps buyers, brokers and carriers get the best pricing on the best risks.

Insurance carriers, wholesalers and independent agents should also ask plenty of questions. Risks cannot be properly gauged unless the insured's history and the entire scope of the project are properly understood. The best wholesale brokers are partnering with their retail agents and clients to tell the complete story of the risk.

Questions that should be asked include:

o Is there a cover letter stating the description of operations, the reason for marketing the account, and the recent carrier and premium history?

o What type of products are the insureds using?

o Do they have a resolution process for clientele?

o Is there a copy of the contractual agreement between the insured and any related parties?

o What is the additional insured status (including completed operations), and is it in the insured's favor?

o Is there a waiver of subrogation in the insurer's favor?

o Is there an indemnification and hold harmless agreement in the insurer's favor?

o What are the minimum limits that are being required? Certainly the absolute minimum should be $1 million/$1 million/ $1 million–but that could increase to as much as $5 million in Manhattan, for example.

o Does the contractor use a third-party peer review provider? Has the site been inspected by a respected third-party expert? Will it be continuously monitored?

From an insurer's perspective, partnering with top wholesalers who have construction expertise can make all the difference. It is optimal when a best-of-class retailer who has construction expertise still brings in a top wholesale partner to add another layer of expertise, market intelligence and stability to the insurance decision.

This allows insurers to underwrite the insured, underwrite the retailer over a period of time and multiple transactions, and underwrite the wholesaler. Price will always be a determining factor, but having a solid foundation of the insured-retailer-wholesaler-carrier working together will help prevent cracks in the insurance and risk management foundation.

Insurance relationships should be treated like banking relationships–everything and anything about the client should be known, including their history and financials, before coverage is written.

This determines if the client is able to offer a quality product or service. It determines whether they have the financial strength and controls to pay claim amounts within their retention, either in the form of a self-insured retention or deductible basis.

The insured, retailer and wholesaler need to sit down and lay it all on the table.

Is the risk a smaller builder who may be unloading land because it can't hold onto the note? This could mean the builder doesn't have the financial stability to carry on with a project.

Or, is the developer using fewer subcontractors on the project? For some, this is a key consideration in today's market. One theory is that a reduction in subcontractors can lead to a higher quality product because fewer people have their hands on the final outcome.

Even in these volatile times, there are plenty of reasons for optimism. Remember, construction is the hallmark of the excess and surplus market, and there is no question it will remain so.

Some admitted carriers and regional companies have come over the bow to write contractors with a cheaper price. This is likely only a short-term trend, though, and in the long run, prices will stabilize and those coverage holes will again become whole, as construction business stays in the domain and expertise of the nonadmitted market.

Additionally, while these new entrants from the admitted market offer a low-cost solution for insurance buyers looking for minimum insurance to get on a work site or meet a contractual obligation, they are not necessarily the best policies for insureds who take their risk management seriously and who understand the value, stability and cost savings that a long-term risk management program and partnership with their retailer, wholesaler and insurance carrier can add to their business.